Oil price bounce and group overhaul put the spark into Shell’s Q2 earnings

● City reaction favourable with analysts saying firm heading in the right direction

Oil major Royal Dutch Shell has reported a jump in second-quarter profits after it was boosted by a rebound in oil and gas prices.

The Anglo-dutch group said adjusted earnings rose from $1.05 billion (£800 million) to $3.6bn, an increase of 245 per cent, as chief executive Ben van Beurden insisted he was making progress on “reshaping the company”.

He said: “Cash generation has been resilient over four consecutive quarters, at an average oil price of just under $50 per barrel.

“The external price environment and energy sector developments mean we will remain very disciplined, with an absolute focus on the four levers within our control, namely capital efficiency, costs, new project delivery, and divestments.

“I am confident that we are on track to deliver a worldclass investment to our shareholders.”

The figures were flattered by a tough second quarter in 2016, when it was hit by weak crude prices and costs linked to its takeover of BG Group. This time last year Brent Crude was trading at less than $45 a barrel.

Shell is also embarking on an ambitious cost-cutting drive and a $30bn divestment initiative. To this end, the group has sold off more than $20bn of assets since the BG takeover.

This year, Shell announced it was selling off a package of North Sea assets for up to $3.8bn to smaller rival Chrysaor, and recently agreed to sell its stake in Irish gas project Corrib in a deal worth up to $1.23bn.

Announcing its latest financial results yesterday, Shell announced an interim dividend in respect of the second quarter of 47 cents.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “There’s a lot to like in Shell’s results, with all the major metrics heading in the right direction.

“Achieving these results at an oil price which is still sub $50 a barrel, while also carrying out and integrating a major acquisition is undeniably impressive. Although admittedly, more of the profit is coming from the downstream business rather than actually pumping oil.

“If we have a slight concern it’s that capital expenditure remains at rock bottom. The group is performing well for now, but at some point it will have to fork out to replenish the oil it’s currently pumping out or selling.”

Shell launched a new energies division last year through which it aims to invest up to $1bn a year by 2020 in areas such as renewable energy, hydrogen and biofuels.